EU agreement for border carbon tax.

EU member states have reached a deal on the world’s first significant carbon border tax, finalising the details early yesterday in the face of claims from the bloc’s key trading partners that the levy creates protectionist trade barriers. Environmental regulators and ministers across the bloc signed off on introducing the carbon border adjustment mechanism. This tool will force foreign importers to cover the cost of their carbon emissions after the deal was provisionally agreed upon last week. The deal, a central part of the EU’s strategy to reduce its carbon emissions to net zero by 2050, is expected to be formally agreed upon by leaders at the European Council and adopted into EU law by the European Parliament before coming into force in 2026. The EU has claimed carbon-related rebates would comply with World Trade Organization regulations.

But several analysts have said that such support would contravene WTO rules should foreign importers need to purchase certificates from the EU to cover their carbon emissions simultaneously.

Following roughly 30 hours of talks that dragged into the early hours of yesterday, policymakers also agreed to raise the target for reducing emissions in industries covered by the European Emissions Trading System, its mechanism for carbon pricing, to 62 per cent by 2030.

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